adminThe Rhodesia Herald,
June 23, 1979
THE new agreement between Salisbury City Council and Heinrich’s Chibuku Breweries on the sale of traditional beer in Salisbury will improve profits for the municipality and be to the best advantage of the African population, says Councillor Norman Henry, chairman of the Rufaro Brewery committee.
The council this week agreed to Heinrich’s leasing the Rufaro Brewery and brewing both the council’s Rufaro beer and their own brand Chibuku, for sale through the municipal liquor outlets and other authorised permit holders.
In this agreement, to come into effect on September 1, the council has won some concessions and improvements on the deal which it originally approved on April 4, and then withdrew on April 26, when a motion to rescind the decision succeeded.
The rent on the Rufaro property will be $50 200 a year, as against $39 000 proposed in April, yielding a rent return of 8 percent on the combined value of the land and improvements.
The rent will be paid monthly in advance instead of annually in arrears, as the old agreement stipulated.
The plant, equipment and transport fleet will be sold for $1,28 million, the same sum as set in the earlier agreement. The production stock will be bought at market value.
Heinrich’s also agreed under certain conditions to pay the council a minimum of $400 000 a year, so that total payments over 10 years would amount to at least $4 million, subject to a force majeure clause.
Under the previous agreement, the council would have received $400 000 a year for nine years, but not in the first year, subject to Heinrich’s profits reaching a certain level.
Another respect in which the city council’s interests have been safeguarded, is on the purchase of production plant and machinery after the lease has been terminated.
The lease conditions now provide that on termination – the lease is terminable on three years’ notice, but not within the first 10 years – the council may within three months buy all production plant and machinery from Heinrich’s at original cost less depreciation. Risk and profit on the plant and delivery of the plant will pass to the council.
Under the former agreement, Heinrich’s could remove the plant and machinery, or offer it to the council for sale.
If Heinrich’s wanted to remove the plant, they would have a six-month rent-free period in which to do this.
Mr Henry also gave the assurance that the agreement adequately safeguarded council employees’ interests.
Heinrich’s have undertaken to offer employment to all employees at present in their brewing and distribution sections, except those whose posts will be abolished or who will be discharged and claim enhanced pension benefits.
LESSONS FOR TODAY
Councils need to enter into strategic business agreements to generate additional revenue instead of relying on rates alone.
It is important for companies, organisations, and individuals to sell off or lease entities that have failed as a way of cutting costs and recouping revenue from such ventures.
In any sell-off, especially of companies and assets it is important to ensure that the welfare of the workers is looked after by ensuring that they are either adequately compensated or are taken on board by the new owners.
It used to be the responsibility of Council through City Marketing, later Rufaro Marketing, to collect revenue that would used to build clinics and schools.
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